Well, I guess I should apologize. Sometimes I forget my own Super Powers.
Take yesterday for instance. Immediately after the second Mahomes interception I said out loud “Wow, it looks like KC is toast.” Sorry about that, SF fans (although in the end, Andy Reid got a ring and I got beer and pizza, so at least for a day all was right with the world, but I digress). The point is, I assuredly suggested one thing and the Cosmos delivered something else.
This kind of thing has happened before. Like last April for example. I said “well, there’s no way it’s going to snow anymore”, so I moved my snowblower out of the garage and put it back in the shed. It snowed each of the next two weekends. To this day I blame myself.
And of course, last Friday in the early AM, I just had to go and do it. In my last missive I somewhat flippantly noted that the S&P 500 merely had to hold above 3,230.78 to complete the historically bullish Stock Trader’s Almanac “January Trifecta” (and I quote, “so anything better than a daily decline of -52.88 SPX points will do the trick”).
-58.84 points in one trading session later, it was all over. Sorry about that folks. Like I said, sometimes I forget my own strength.
The Implication
The “good news” in all of this is as follows:
*Historically, a bullish January has in fact typically been followed by a bullish Feb through Dec. So, it is reasonable to label an “Up” January in the stock market as “bullish”
*On the other hand, when January is NOT up, it is NOT accurate to label it as “bearish”. Rather, it is essentially “meaningless”
For the record, in the past 7 decades, the record is as follows:
| Feb-Dec Performance | If Jan is UP | If Jan is DOWN |
| # times Feb-Dec UP | 38 | 16 |
| # times Fe-Dec DOWN | 6 | 11 |
| % times Feb-Dec UP | 86% | 59% |
| % times Feb-Dec DOWN | 14% | 41% |
| Average Feb-Dec % +(-) | +11.8% | +1.2% |
Figure 1 – S&P 500 Feb-Dec price performance depending on whether S&P 500 Index showed a gain or loss during January; 1949-2019
The key things to note is that:
*An UP January has overall portended favorable market results going forward
*A DOWN January has not necessarily been a harbinger of doom (the overall results just haven’t been nearly as good as when January shows a gain)
Summary
Now typically at this point I would say something reassuring about the prospects for the stock market in the months ahead. But given the damage I have already done with my own words (not to mention this ominous seasonal oddity), I think the less I say right now the better.
Trust me. It’s better this way…
Jay Kaeppel
Disclaimer: The information, opinions and ideas expressed herein are for informational and educational purposes only and are based on research conducted and presented solely by the author. The information presented does not represent the views of the author only and does not constitute a complete description of any investment service. In addition, nothing presented herein should be construed as investment advice, as an advertisement or offering of investment advisory services, or as an offer to sell or a solicitation to buy any security. The data presented herein were obtained from various third-party sources. While the data is believed to be reliable, no representation is made as to, and no responsibility, warranty or liability is accepted for the accuracy or completeness of such information. International investments are subject to additional risks such as currency fluctuations, political instability and the potential for illiquid markets. Past performance is no guarantee of future results. There is risk of loss in all trading. Back tested performance does not represent actual performance and should not be interpreted as an indication of such performance. Also, back tested performance results have certain inherent limitations and differs from actual performance because it is achieved with the benefit of hindsight.
